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Gold Price Reverses Ahead of Yearly Low to Eye 50-Day SMA

Gold Price Reverses Ahead of Yearly Low to Eye 50-Day SMA

David Song, Strategist

Gold Price Talking Points

The price of gold initiates a series of higher highs and lows as it bounces back from a fresh monthly low ($1617), and the precious metal may attempt to test the 50-Day SMA ($1691) as it reverses ahead of the yearly low ($1615).

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Gold Price Reverses Ahead of Yearly Low to Eye 50-Day SMA

The price of gold appears to be defending the September range as US Treasury yields pull back from fresh yearly highs, but bullion may continue to negative slope in the moving average to largely mirror the price action from earlier this month.

Source: CME

As a result, the rebound in the price of gold may end up being short-lived as the CME FedWatch tool continues to show a greater than 90% probability for another 75bp rate hike, and it seems as though the Federal Reserve will retain its existing approach in combating inflation as the Summary of Economic Projections (SEP) reflect a steeper path for US interest rates.

Looking ahead, the update to the US Personal Consumption Expenditure (PCE) may force the Federal Open Market Committee (FOMC) to retain a hawkish forward guidance as the core rate, the Fed’s preferred gauge for inflation, is expected to increase to 5.2% in September from 4.9% per annum the month prior, and evidence of persistent price growth may prop up US yields as it puts pressure on Chairman Jerome Powell and Co. to pursue a highly restrictive policy.

With that said, developments coming out of the US may continue to drag on the price of gold as the FOMC plans to implement higher interest rates throughout the rest of the year, but the precious metal may attempt to test the 50-Day SMA ($1691) ahead of the Fed rate decision on November 2 as it reverses ahead of the yearly low ($1615).

Gold Price Daily Chart

Source: Trading View

  • The price of gold initiates a series of higher highs and lows following the failed attempt to test the yearly low ($1615), with a close above $1670 (50% expansion) raising the scope for a run at the $1690 (61.8% retracement) to $1695 (61.8% expansion) area, which lines up with the 50-Day SMA ($1691).
  • However, the price of gold may track the negative slope in the moving average like the price action from earlier this month, with a move below the $1648 (50% expansion) region bringing the yearly low ($1615) back on the radar.
  • A break/close below the Fibonacci overlap around $1601 (38.2% expansion) to $1618 (50% retracement) opens up the $1584 (78.6% retracement) area, with the next region of interest coming in around the April 2020 low ($1568).

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--- Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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